Chicken or Egg dilemma - Shared Services or Outsourcing? Which should be done first?
This, I believe, is a perennial question for organizations to answer when they embark on the journey of consolidating functions. Each approach has its own merits and demerits when pitted against each other.
Outsourcing brings with it the following benefits among others
- Access to the right skills and experience
- Access to a plethora a of best practices, as a result of serving multiple clients in multiple industries
- Ability to transition, manage transition and set shop quickly
- Ability to add services/processes delivered seamlessly
- Quick payback in terms of reduced cost of operations (especially when Outsourcing is combined with Offshoring)
Shared Services approach has its own merits among others
- Monitor and control delivery
- Ability to maintain quality of service delivery
- Proximity to business; quick response to business
- Skills and processes are unique to the organization
- Incremental investments
However, which approach is the best? Which should be done first? If you ask me, I would give a Consultant's answer, "It depends". The best approach often depends on the maturity of the organization, maturity in functions and processes; processes and functions amenable to consolidation, among others.
And for most organizations, the best way forward is a combination of both shared services and outsourcing, culminating in global business services, where services and processes are managed and delivered globally, irrespective of from where or who delivers those services.